India, Cyprus ink revised tax treaty

NEW DELHI: India and Cyprus on Friday signed the revised tax treaty along with the protocol that paves the way for New Delhi to tax capital gains locally.

The protocol is expected to come into effect in India, in respect of income derived in fiscal years beginning on or after April 1, 2017.

Amended tax treaty provides for source based taxation of capital gains arising from alienation of shares, however, provides for grandfathering of investments made prior to April 1, 2017, which would continue to be taxed in the country of residence.

Amended tax treaty also expands the scope of ‘permanent establishment’ and reduces tax rate on royalty from 15% to 10% to align with India’s domestic tax rate.

Amended tax treaty also provides for assistance in collection of taxes and provides for effective exchange of information on tax matters including bank information, according to an official statement.